G+J ready to exit U.S. market

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It didn’t take long for G+J USA Publishing to dispose of its business magazines. Two weeks after selling its consumer titles, the unit of Bertelsmann AG officially reached an agreement late last month to sell selected assets and liabilities of Inc. and Fast Company to a newly formed publishing entity controlled by Joe Mansueto.

"I am delighted to acquire two of the nation’s leading business magazines. I have long admired both publications. They have everything I look for in a media company: world-class brands, exceptional management, high-quality content and loyal readers and advertisers," said Mansueto, founder of investment research firm Morningstar and an investor in Time Out Chicago .

The acquisition was expected to close by the end of June. The price for the magazines was said to be about $35 million.

The sale of Inc. and Fast Company marks the last chapter in G+J USA and parent company Bertelsmann AG’s foray into the U.S. magazine business. The estimated sale figure is significantly below the reported $565 million the company paid for the two magazines in 2000—$200 million for Inc. and $365 million for Fast Company .

Insiders said Manseuto outbid the Economist Group, which publishes The Economist and CFO, for the two titles. A factor in Mansueto’s favor was his willingness to keep Fast Company open when most other bidders planned to shutter the struggling magazine, insiders said. "It’s a plus that 40 people won’t be losing their jobs right away," one source said.

Fast Company lost about $8 million last year, according to people familiar with the matter. Through the first five months of this year, the magazine’s ad pages fell 15.4%, according to Publishers Information Bureau (PIB) figures.

Inc. was said to have posted a "contribution" of about $4 million in 2004. Through May of this year, the magazine’s ad pages declined 7.2%, according to PIB.

The bidders that planned to shutter Fast Company did not factor the publication into their long-term financial calculations regarding the deal. Setting Fast Company aside, these bidders viewed a $40 million price tag for the publications as roughly equivalent to a 10-times EBITDA multiple on Inc.’s $4 million in contribution.

That multiple proved too rich for most of the bidders, especially considering Inc. is struggling to maintain ad pages and the general business magazine market is also sputtering, at least when it comes to print pages.

With the exception of Business 2.0, the major general business magazines—BusinessWeek, The Economist, Forbes and Fortune —have all lost ad pages year-to-date this year. Many of these magazines have print ad revenue that is about half what it was at the height of the dot-com frenzy. "Either they all got stupid together or it was a market issue," said one bidder who dropped out.

G+J agreed to sell its consumer titles, including Parents , to Meredith Corp. on June 9.